I think one line of thinking in acquisitions is not just to get control of a product, but rather to take that startup team under the Google wing.
I am a firm believer in the idea that the most important asset that a company can have is its employees - even Google. Granted - acquiring a company and forcing the employees to work within the Google system is a piss-poor way of getting someone to work for you, but ultimately, how else can you get those crazy entrepreneaurs to work for you?
This acquire-to-hire plan backfires all the time - under performance, stagnation of the acquired product, etc etc, but I can see the appeal to it. At least, in theory.
this is my favorite quote, from the "Be Silly" section:
"If you want to publish a paper in economic theory, there is a safe approach: make a conceptually minor but mathematically difficult extension to some familiar model. Because the basic assumptions of the model are already familiar, people will not regard them as strange; because you have done something technically difficult, you will be respected for your demonstration of firepower. Unfortunately, you will not have added much to human knowledge."
be silly. do something completely different. the normal ideas that techcrunch spits out day after day are played out, do something revolutionary.
I think it's important to note that this was not a public meeting for all CEOs of all companies everywhere - just their portfolio companies. Sequoia asked the CEOs to keep everything private, but then the notes leaked, then the slides leaked, and then Sequoia was forced to discuss it. Splitting hairs, maybe, but I think it's an important distinction.
yeah, that's fine. script kiddies run scripts that other people make. but very few people can say that they took down yahoo. i mean, that's not a typical script kiddie success story, is it?
talk him down all you want, but i remember what it was like when this guy was doing his work (however you want to judge it.) he made headlines. script kiddies don't make headlines, what they do has already been done and automated before them. there was something original to his work, even if he was just using an original combination of scripts. that makes him a hacker, imho.
I love biking: I ride a fixed gear to school almost every day, it's only a few miles and I can get to class faster if you include the time it takes to park and walk to class.
The health benefits for riding a bicycle are a fantastic reason to start and continue doing it.
But one thing I would just like to point out to everyone - you are going to pay for fuel, either way. You might not be paying for oil when you bike, but you definitely need to pay for food. If you are trying to lose weight and reduce your calories, I guess you can afford to eat less, but eventually you'll need to eat a lot (really, it's a noticeable increase) of food to make up for your exercising. And that costs money - so I really wonder about the savings gained from biking.
This shouldn't detract anyone from riding a bike, I'm just sayin'.
i come from a somewhat similar background (i'm 23).
to add on: this is why i'm very happy with .NET. the overlap between web apps in ASP.NET and client based apps is large. no mac or linux, obviously. recently i've started building a small windows app again, and i've been so pleased by how quickly and smoothly it's been - even though it's been years since i've worked on a windows app.
when i first saw this post title - i instantly thought in my head, hey - doesn't rescuetime do that?! i absolutely love their product. i'd work for them in a heartbeat if my skillz were better.
i don't think client-based apps are dying, at all. if anything, rescuetime is showing that they are on the rebound. good work, guys.
Couldn't agree more with the idea with about ignoring companies that say they need $5-$10 mil in order to be a "viable business." Today's companies (look at ycombinator) can do that with much, much less. $1-$2 mil seems like a good level - more than I would personally need! :)
To restate/clarify my original point (messed up the thread, my bad): getting a valuation of $25 mil to $50 mil, with a TOTAL investment of $1-$2 million is very hard. Google and a few choice companies may have done that, but I think that's definitely the exception. A lot of good companies are out there that aren't Googles (take over the entire market in 5 years) that deserve investment, as well.
These investments might not produce a valuation of $25-$50 mil after 5 years (like Google, etc etc) - but maybe they would after 10, 12, 15 years. This is where I think we agree.
I bristled at this:
"A business that needs no more than $1-$2 million in financing to become a $25-$50 million (exit value) company, simply by executing the core business plan."
That is an insane requirement for return. I'm not sure how that's even possible - or if any company has even managed to do that. Someone prove me wrong?
$25 million is a lot of money, but so is $1 million in funding. Most web 2.0 companies need no more than $100k or so to get to profitability, and can easily exit at $2.5 million. Same ratio, but it sounds a lot more achievable. So the only real issue is scale.
Bear in he's talking about enterprise software (i.e. support contracts, custom software, consultants). When you start doing custom work and get paid by the hour your revenue goes through the roof. So you can get to a $25 million valuation pretty easily, if you're willing to be a software/consultancy hybrid.
This is not the sort of situation I would invest in. If you are billing by the hour, it is unlikely to be a leveraged business, and the investment return is unlikely to be as comfortable. Additionally, due to the smaller size, there would have to be many, many investments; it's hard to find many of very good quality.
It's very hard to sell to large sized enterprise without supplying custom work. You're right that the custom work isn't leveraged, but it's a prerequisite to get your product installed into their (often silly) IT structure.
This only requires a portion of your engineering and support resources, and there is no reason you could not establish strong ties to an existing consulting organization to be the "consulting services" arm of your company.
That tends to be the cash-cow that enterprise software vendors grow into (SAP, Oracle, et al), though I agree that it's not the place you want to target from the get-go. It probably does have some seductiveness if you're boot-strapping.
Well, let's see how well Canada does if the US economy collapses... :-/ So far the strong loonie has decimated some industry sectors, I'm surprised things aren't worse overall.
Canada is arguably set up for a harder fall. Household balance sheets are even worse there, and the dependence on commodities could prove to be a disaster in a global economic downturn.
Household balance sheets are nowhere near as bad here in Canada as they are in the US. This is common knowledge so please provide some figures if you've got something that suggests otherwise. We also have stronger banks and didn't get nearly the "deals" that American's got for mortgages.
You are correct about our dependence on resources, but the US is only one of several markets we export to. I'm sure China and India won't mind buying our oil and trees.
Again, a citation is required. Canadian economists regularly state that the D/I ratio is much better in Canada than in the US. (Although it is a cause for concern nonetheless)
Also, given the dramatic drop in US housing values and only a leveling off of Canadian prices, I question your second point as well, at least looking forward.
Quote:
"“The issue of length is important to all these guys, and the way you know that’s the case is how often they tell you that length is not important,” said Mr. Kaplan, who sailed on the Maltese Falcon on its maiden voyage from Istanbul, where it was built, around the Greek Islands to the French Riviera."
In a lot of ways, this story should be right up my alley - I am a hacker, I'm very interested in starting my own company and finding someone to finance it, and I have spent many days sailing on my dad's sailboat. Sailing is a wonderful pastime - something I'm sure most hackers would love to do (you have to work within a set of strict parameters in a given system, but you can beat the system - temporarily - with the smallest adjustments to your equipment.) That's cool - and very hackerish (imho.)
But I'm sickened by this boat. As cool as it is - and the technology behind the sails is damn cool - it's just a disgusting waste of money. Do you really think that Perkin's gets his value out of this boat - or do you think it's just another exercise in Who-Has-The-Biggest-Dick?
We all want to have the biggest dick (excuse my language), but it's very important to recognize who you have to step on to get to that point. How many companies got shit term sheets because Perkins had to finance a boat that can never be fully enjoyed? (Larry Ellison wants to sell his megayacht because he can't even park it in normal harbors - he has to use industrial marinas to dock up.)
I think it's extremely appropriate that this boat is sailing into an American harbor for the first time as our financial system is going through one of the biggest moments of turmoil in decades. You can't make up that kind of stuff.
I'm not sure I can agree with you. The man was not born wealthy, he achieved his wealth through hard work and persistence. He invested in small companies that may or may not have succeeded - he took risks and to his luck (and apt judgment), some of those risks paid off.
Does he get value out of his boat? From what I garnered from the article, it sure seems that way. And if you look at most successful individuals, you will find that many of them are highly competitive in all aspects of life. It's their nature, so you shouldn't hold it against them. My point is, even if it is the question of "Who-Has-The-Biggest-Dick", who are we to say that's immoral, unethical, or unjust?
And in regards to the "inappropriateness" of the boat sailing into the SF harbor, that's just plain ridiculous. Should everyone suddenly stop wearing expensive clothes, driving expensive cars, or buying expensive houses because the brokers on Wall St made a couple of stupid bets?
I have nothing against Mr. Perkins personally. I think he's a great investor - and he's undoubtedly a lot smarter than I am. I have nothing but respect for the man's accomplishments, I just take offense at how he chooses to spend his money. Now, granted, yes, it's absolutely none of my business at all. I would hate to be told how to spend my money, so it's hypocritical for me to judge him on how he spends his money.
But with that said, I just think it's a waste.
You can't moor a boat this size in a normal harbor (yet). And in a lot of ways, bigger isn't better (especially for a sailboat, as tlrobinson mentions below.) I read an article about a visitor on Larry Ellison's ship that said it was like walking in an empty mall. That's just how it feels - huge, imposing, but utterly empty.
I think it's hard for us to say if he gets the value out of his boat or not (and it's not our business anyway, true.) I speculate that he doesn't because I see this boat as just another conspicuous display of wealth intended to validate Mr. Perkins' ego. And if you can't feel secure about yourself without a big boat - then I really think you should reevaluate your priorities in life.
"Should everyone stop [displaying their wealth] because the brokers on Wall St made a couple of stupid bets?"
No, of course not. If we take away that - then what reason do you have to try to make it big?
The source of my "hate" of money is that I think people (especially Americans) think money is the answer to everything. To quote Blow - "Money isn't real, it only seems like it is." Over the long term, a big boat will not make you any happier than a smaller boat. Anything that you buy eventually will lose its luster. That Lambo? It'll feel awesome that first day, but then the second day - you're a little bit more used to it, and it loses a little value to you. By year 10, what is it worth to you?
I just feel that if people recognize this - that you eventually get used to all this stuff that you buy - than they wouldn't need to spend so much money on themselves. There are people starving in this world, dying of illnesses that could be treated, and Mr. Perkins is sitting in his empty mall of a boat. I personally feel that's immoral.
But he's free to do what he wants - and I'm free to take potshots at him from an internet forum. If he doesn't want to make this world a better place with his money (and honestly - he might be doing that as well, I probably am not giving him enough credit) - he's free to do that.
(Another important thing to consider is that this boat will be used to entertain hundreds of people, and not just for carrying around 12 guests. So it has many more uses then I am giving it credit for.)
laut: "It isn't his fault that the financial system is a mess. Turn to politicans and voters for that."
Anyone who demands greater and greater returns on their investments, at any cost - is the cause of this mess. Greed produces this demand. Poor people and rich people can both be guilty of being greedy, but it is people like Perkins and company that have the power because they hold the chips, and it is their demands that get heard over everyone else. Thus, the richer and greedier that you are - the more likely it is you that caused this mess.
And to clarify, I hope the boat doesn't sink with anyone on it. I don't wish that on anyone.
Care to back up your claims that Perkins demands greater and greater returns "at any cost" or that he has any real connection to the subprime meltdown?
Asked how much the Falcon cost Perkins, he tells Stahl, "The rule of thumb, Lesley, is that a big yacht costs about a million dollars a meter."
The Maltese Falcon is 88 meters long.
"I know it cost more than $88 million," Stahl remarks. "I've heard about $150 million. But I've also heard $300 million."
"No, not $300 million," Perkins says. "That's too much."
"Why don't, why won't you tell us? You've told us everything else. You don't seem to be embarrassed about everything else?" Stahl says.
"I'm embarrassed about that," Perkins admits.
Asked why, Perkins says, "There's the homeless and charity and there's lots of things you could do with that money that would improve the world, right?"
"Oh, good point. That you bring up yourself?" Stahl asks.
"Yeah," Perkins says. "So, you know, 'How selfish is this guy?' is, I guess, is the criticism. So the answer's pretty selfish, but I'm just not gonna put a number on it."
Why did it have to be the biggest boat?
"Lesley, I could give you some technical reasons on why it really has got to be big to work right. But I just wanted the biggest boat. Let's admit it," he says.
"It’s ego," Stahl remarks.
"Do I have an ego? Yes," Perkins admits. "Is it big? Yes."
> How many companies got shit term sheets because Perkins had to finance a boat that can never be fully enjoyed?
Probably none - VCs invest very little of their own money.
More to the point, who cares it can be "fully enjoyed"? Not to put too fine a point on it, but I don't get any benefit from how much someone else enjoys something.
I do, however benefit from the development and practice of amazing technology. Heck, I benefit from folks who do honest work on something that someone else values enough to pay for with their own money.
I agree about the size. Especially for a sailboat, I would say smaller is better. I have more fun sailing a 12' Laser dingy than a 40' sailboat, simply because it is more responsive and you feel like you have more control.
And for sail and power boats alike, I don't think I would want to own a boat that I couldn't pilot myself or fit into most harbors. Otherwise it's basically a glorified floating luxury hotel and expensive status symbol.
He can pilot it himself. I think if you are going to have a mega yacht, sail is the way to go over power. Yeah, it's a floating home, but it can also sail - that's awesome. You can take a tender into harbors.
Also, longer sail boats can go faster than smaller ones, when you don't plane. So a bigger boat means you can travel faster over long distances.
He can take the helm or push some buttons to trim the sails when they're on open water, but I doubt Perkins is the guy navigating harbors and docking it. With a yacht that big it takes a professional. Their crew is 20 people!
And while I've certainly never been on the Maltese Falcon, with a boat that big it seems like there wouldn't be much difference between a motor yacht and sailing yacht, except the sailboat heals over a bit and you save a lot on fuel.
This boat is a great advertisement for progressive taxation; under more extreme progressive taxation Perkins would still have the biggest boat (which is all he really cares about), it just wouldn't have be nearly so big or wasteful =P.
When the communists took power in China, mobs would go from house to house in what was euphemistically called "people's courts" The mob would bring out the capitalist, demonstrate all of the rewards of their work. Usually they would be whipped into a frenzy, the idea being that there was no way anybody needed any of that wealth.
Either you understand how deeply immoral that is or you don't.
I'd say it's a great advertisment for how much wealth that can be created in a relatively free economy. You don't see many mega yacht buyers from Cuba or North Korea.
And I think your thought of having the state stealing even more money from people is despicable.
I am a firm believer in the idea that the most important asset that a company can have is its employees - even Google. Granted - acquiring a company and forcing the employees to work within the Google system is a piss-poor way of getting someone to work for you, but ultimately, how else can you get those crazy entrepreneaurs to work for you?
This acquire-to-hire plan backfires all the time - under performance, stagnation of the acquired product, etc etc, but I can see the appeal to it. At least, in theory.